The Eicher Motors stock crashed to a 52-week low on Wednesday after the company reported lower than expected sales volumes of its Royal Enfield motorcycles. The stock closed at Rs 23,171.10, 6.71% lower than Monday’s close. The sales volumes for the company in September were impacted by Kerala floods (which accounts for 11% of the company’s volumes), a strike at one of its plants and weak retail demand. The company said in a statement on Tuesday that the strike at its Orgadam facility near Chennai has resulted in loss of production of 10,000 motorcycles in September 2018.
Royal Enfield’s motorcycles recorded only 2% growth to 71,662 units in September 2018 as against 70,431 units in the same month last year. Overall two-wheeler volumes for OEMs grew by 12% year-on-year in September 2018 partly led by strong growth in exports and push of inventory to dealers. Retail demand was quite weak in September. Hero reported 7% year-on-year volume growth in September 2018. Bajaj Auto’s overall volumes increased by 17% year-on-year, led by a growth of 10% year-on-year in domestic motorcycle volumes, 12% year-on-year growth in domestic three-wheeler volumes and 30% year-on-year growth in exports. TVS reported 18% year-on-year volume growth led by 20% year-on-year growth in exports while domestic two-wheeler volumes were up 18% year-on-year.
In August, Royal Enfield reported a marginal growth of 1.8% year-on-year to 68,014 units as compared to 66,872 units in the same month of last year. “All major OEMs have reported strong double digit growth in July 2018 except for Maruti and Eicher Motors. Eicher reported 5% year-on-year volume growth to 69,063 units, which was below our estimate of 75,000 units due to transport operators’ strike,” analysts at Kotak Institutional Equities observed.
Analysts at Edelweiss expressed their concerns regarding the company’s capacity constraints for two wheelers after its Q1FY19 results. “Slower pace of capacity addition will restrict EIM’s ability to capitalise on the virtual monopolistic situation that it currently enjoys,” they said. The company on Tuesday, said in a statement, “We are in dialogue with our plant based forums to amicably resolve all concerns. Royal Enfield has always been deeply committed to maintaining and furthering cordial relations with its staff and workforce to understand and fulfill their aspirations, and we will continue to do so. We expect to reach regular levels of production in a phased manner. Our manufacturing facility at Vallam Vadagal continues to operate and deliver to its full capacity”.